January 21, 2011

D.C. Appeals Court Weighs in On Private Attorneys General

In an en banc decision handed down yesterday, the D.C. Court of Appeals outlined the people who can file suit on behalf of the public under the District’s wide-reaching consumer protection law, though the court placed some limitations on so-called private attorneys general.

The court’s 92-page opinion, written on behalf of the full court by Judge Inez Reid, found that former Rep. Alan Grayson (D-Fla.) was entitled to file suit against several major telecommunications companies as a private attorney general because he had properly articulated “actual or threatened injury,” which can arise when statutorily created rights are invaded upon. But the court found that Grayson had failed to state a claim upon which relief could be granted.

In a related case, the court found that Paul Breakman was not entitled to file suit against AOL as a private attorney general because he had failed to meet the constitutional standing requirement by providing enough facts to show he had suffered injury.

The key difference appears to be that Grayson had actually purchased the product in question in his consumer protection case, whereas Breakman had not and therefore had no ground to show that he had or could potentially suffer injury.

Grayson’s suit stems from his time as a practicing attorney in Washington before he ran for Congress. Grayson sued several telecommunications companies in 2002 in what he called a “whistleblower action,” alleging that the companies had defrauded the District’s government by failing to report unused calling cards as unclaimed property under law. Grayson, who alleged that he had purchased some of the calling cards while in Washington, sought to recover the money left on the cards, known as “breakages,” for the District.

According to the court’s opinion, as of 2003, each of the defendants allegedly held around $200,000 in communications prepayments. The named defendants include AT&T Corp.; AT&T’s division SmarTalk; AT&T Wireless Services Inc; Sprint Corp.; Sprint Communications Co.; Sprint International Communications Corp.; Verizon Communications Corp.; Verizon
Washington DC; and Cellco Partnership.

As reported by The National Law Journal last year, Grayson’s suit garnered widespread attention in Washington because it raised the question of whether private attorneys general are able to sue corporations under the District's consumer protection law.

In September 2009, a three-judge the court of appeals upheld a dismissal of the case because Grayson, who was elected in 2008, was not directly affected.

After a full panel heard arguments on the case in June, yesterday’s opinion said that because Grayson showed the potential to have suffered injury under the District of Columbia Consumer Protection Procedures Act, he did indeed have standing. But because it was the District and not he who suffered damages stemming from the calling card breakages, he had failed to state a claim upon which relief could be granted.

In Breakman’s case, he alleged that AOL failed to disclose to its members that there were cheaper options for monthly dial-up ISP service charged to new members. Because Breakman did not show that he was an AOL member himself or that he was affected in any way other than by simply being a D.C. resident, the court determined he lacked standing.

Judge Vanessa Ruiz, who concurred with the court’s finding that Grayson had failed to properly state a claim, wrote in her dissent that she thinks that both Grayson and Breakman had standing to bring a lawsuit. She writes that she would have remanded Breakman's case for further proceedings because he had properly stated a cause of action.

Victor Kubli, a name partner at Kubli & Associates who argued along with Walter Dierks on behalf of Grayson, said that while he would have liked for the court to go further in allowing private citizens to act as attorneys general on behalf of the public, he still felt “pleased” with the outcome.

“The court clearly went further than the trial court was willing to go and further than the defendants wanted it to go in expanding the universe of people who qualify for standing in these consumer protection cases. We view the court’s decision as positive for Mr. Grayson and as empowering to consumers who file a claim under the consumer protection statute,” Kubli said. He added that Grayson’s legal team is “weighing its options” regarding how to address the claim upon which relief can be granted issue.

Jay Lefkowitz, a Kirkland & Ellis partner who argued the case on behalf of the telecommunications companies, could not be reached for comment.